By Yoon Ja-young
Staff Reporter

The non-bank financial sector, including credit financiers, savings banks and insurance companies are suffering a credit crunch. It has become difficult to find buyers for their bonds, and the concern over bad debt from construction projects is growing. Some are resorting to their mother companies to access liquidity.

Credit financiers used to raise money by issuing corporate bonds, commercial papers or asset-backed securities, however, issuance has dropped notably recently on falling demand.

They issued 145 billion won worth of bonds in October, a drastic fall from 740 billion the previous month.

Credit card firms issued 640 billion won in bonds, down 25.6 percent from September. They are paying over 8 percent in interest on the bonds, compared to around 6 percent in April, as institutional investors are shunning them.

They are also facing growing concern over project financing amid a collapse of the bubble in the real estate market.

The overdue rate on loans given to construction projects by mutual savings banks recorded 14.3 percent, notably higher than that of banks' 0.64 percent. Around one quarter of the loans for project financing have been made through savings banks.

The concern is making people refrain from depositing money in savings banks despite the high interest rates they offer.

Insurance companies are planning a capital increase to meet the solvency margin ratio as their assets fall in value. The financial regulator advises insurers to keep their solvency margin ratio above 150 percent. Mirae Asset Life Insurance is preparing a 150 billion won capital increase next month, and some foreign life insurers announced they also will be increasing their capital soon.

Some non-bank financial firms are resorting to their mother companies. Woori Financial plans to get 300 billion won in liquidity from Woori Finance Holdings, and Hana Capital is to get 200 billion won from Hana Bank.

chizpizza@koreatimes.co.kr